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Business Gets Hard Nosed About Soft Money

June 22, 1997

Government: CAMPAIGN FINANCE

BUSINESS GETS HARD-NOSED ABOUT SOFT MONEY

It's becoming the fed-up golden goose

When a handful of corporate giants--including Monsanto, GM, and AlliedSignal--declared in early June that they would no longer give unregulated "soft money" to the political parties, champions of campaign-finance reform reached for the champagne. After all, Corporate America was the main piggy bank for $262 million in soft dollars. That money was supposed to aid party-building activities during the '96 elections, but often helped underwrite the Presidential and congressional campaigns and even state races. With Capitol Hill resisting changes in the way candidates get financing, maybe business would take the lead in cleaning up the money morass, some reformers thought.

Wishful thinking. True, many corporations are fed up with the status quo, but they aren't looking to overhaul campaign finance. Rather, they're searching for alternative ways to keep their influence on campaigns while increasing control over how their dough is spent. Possibilities include raising more money through political-action committees, increasing personal donations, and financing issue-oriented campaigns. "The lack of accountability is the big complaint about soft money," gripes one corporate lobbyist. "No one can ever find out from the parties where the money goes." Adds AlliedSignal Co. lobbyist Kenneth Cole: "We're exploring other avenues for our soft dollars."

As soft money loses its luster, Washington is bracing for an explosion of business-backed issue-advocacy campaigns aimed at selling ideas instead of candidates. Issue ads appeal to execs because they can directly champion policies they favor. In recent weeks, Cole and other corporate lobbyists have met to try to craft a coordinated strategy for running issue-oriented ads promoting business' agenda.

One goal of this approach is to counter an ongoing blitz by organized labor, which poured $35 million into issue ads that mainly benefited Democrats during last year's congressional campaign. And AFL-CIO President John Sweeney has continued to spend political dollars. In April, the federation spent $700,000 on TV ads criticizing a corporate foreign-tax credit for diverting money from fixing up America's crumbling schools.

FLURRY OF ADS. "There's a lot of concern that we're not doing enough to respond to labor," says a business rep. That's one reason business, already savvy in selling products to Americans, wants a bigger role. Predicts Bruce Josten, senior vice-president of the U.S. Chamber of Commerce: "We'll be able to craft a better message than the parties."

So, well before the '98 elections, voters may see a flurry of ads pushing business' stance on issues such as trade, the environment, and entitlement reform. The upshot could be campaigns notable more for substantive debate than the personal-attack ads the Democrats and Republicans have been firing on one another. "The campaigns will focus around a set of sharp issues," predicts James E. Post, a management professor at Boston University's School of Management, "because money will be marshaled on the pro and con side of the issues."

But there's also the danger that these issue campaigns could backfire by making corporations political targets. Just as organized labor has been attacked as a hostile outside interest trying to buy local elections, Big Business could become the villain for populist campaigns.

Companies also have to make sure they don't cross a line with the Federal Election Commission. The explosion of issue-oriented ads in '96 raised red flags at the FEC, now studying whether some groups overstepped legal bounds by advocating the election or defeat of particular candidates. On Capitol Hill, legislation sponsored by senators John McCain (R-Ariz.) and Russ Feingold (D-Wis.) also would place curbs on issue ads.

LEVELING OFF. Both parties are warily watching how business will spend its cash in coming campaigns. And for good reason. For '96, corporations accounted for an estimated 90% of the GOP's $138.2 million in soft dollars and 70% of the Democrats' $124 million. Already, there are signs that these types of donations--which have tripled since 1992--might be leveling off. The Republican National Committee says that during the first four months of 1997, it raised $9.3 million in soft money, about the same as for the same period of 1995. The Democratic National Committee hasn't released its figures yet but admits it's $14 million in debt--a sign that the Donorgate campaign-finance scandal has hurt the party's fund-raising efforts.

If business cuts back significantly on soft-money donations, as many corporate lobbyists privately predict, both parties will suffer. The Dems nearly matched the GOP in that category. But when it comes to "hard" dollars--the direct contributions limited by law--Republicans outraised them, $416 million to $222 million. DNC Chairman Steve Grossman plans to offset soft-money losses by closing that gap. "We want to expand our small donor base," he says.

Despite its hard-dollar edge, the GOP is also worried about a falloff in corporate soft giving. "There's no doubt it would hit us hard," says RNC Chairman Jim Nicholson. In response to complaints about how the money is spent, Nicholson says he plans to appoint business reps to an accountability task force to oversee how funds are distributed.

Some lobbyists doubt that's enough to stop a corporate exodus out of the soft-money game. Too many execs say they're angry that the parties leaned on them so heavily in the last campaign. And with Donorgate turning a harsh spotlight on questionable soft-money donations, some businesses figure it's time for changing the system. But their fixes may prove a far cry from what the campaign-finance reformers had in mind.By Mary Beth Regan and Amy Borrus in WashingtonReturn to top